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Wednesday, 13 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - Honorable senators may desire to be informed of the conclusions of the Tariff Board in regard to this industry. The board has accepted the position that the local manufacturers obtain their steel in Australia as cheaply as do the manufacturers in the United Kingdom, and therefore the tariff - whatever it may be - is imposed purely on the costs of Australian manufacturers in order to equalize the position and protect the Australian industry. The Tariff Board met with some difficulty in making its inquiries because, as honorable senators will see on page 7 of the report, when it endeavoured to obtain from the manufacturers themselves the local cost of production, the only figures available were those that obtained in the depression period. When production was increased, the overhead charges were also reduced,but not in the same ratio. The Tariff Board was obliged to make several investigations into this matter.

Senator Hardy - Did the manufacturers refuse to disclose certain figures?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - No, they supplied them. The report states -

The costs of production submitted in evidence by W.E. Macpherson, on behalf of Macphersons Proprietary Limited, the principal Australian manufacturer of black bolts and nuts, were not in sufficient detail for the requirements of the board, and a special investigation conducted at the instigation of the board revealed that

(a)   the costs submitted were based on operations during 1931-32 when output was very low. In the following year output had increased by more than 50 per cent. with an appreciable reduction in costs.

(b)   The company sells its productsis manufacturers, as wholesalers, and as retailers, and segregation of selling costs was impracticable,

(c)   For the same reason, exact allocation of profits derived from the manufacture of bolts and nutswas impracticable, but the available data pointed to the conclusion that, despite comparatively low output, freedom from overseas competition had enabled the company to earn a. high margin of profit per ton of product sold.

During the last twelve months the board has held several inquiries into various branches of the metal industry, and in accordance with article 10 of the United KingdomAustrulia Trade Agreement has paid particular attention to the relationship between costs in the United Kingdom and in Australia. The general conclusion arrived at by the board is that the ratio of all costs is about l.6 in Australia to . 1 in the United Kingdom when the Australian costs are expressed in Australian currency and the United Kingdom costs in sterling. Special circumstances in individual cases sometimes lead to a small variation from this ratio, but after a close examination of the particulars obtained at the special investigation into the cost of manufacturing bolts and nuts in Australia and the available evidence regarding costs in the United Kingdom, the board is of the opinion that the adoption of a 1.6 to 1 ratio as applying to the " costs above steel " would be slightly to the advantage of the local manufacturer.

In this connexion it should be pointed out that the local manufacturer's estimates tendered in evidence were that labour costs are 56 per cent. higher in Australia than in the United Kingdom and that "expenses" other than labour and raw materials are 50 per cent. higher in Australia - the weighted average for " costs above steel " being53 per cent.

The board is of the opinion that a duty of 35 per cent. applied to the "costs above steel ", if practicable, would provide adequate protection to the local industry. This duty - with the statutory 10 per cent. added to the value for duty - would amount to 38½ per cent. of the " costs above steel " and supplemented by the exchange rate of 25½ per cent. would penult the local manufacturers to gain the whole market if the " coats above steel " were kept within the ratio of 1.04 to 1.

Added to this protection the local manufacturer would have, as already explained, a further ls. Bid. per cwt. represented by the advantageous difference in freight, less the disadvantageous difference in steel costs.

Senator Guthrie - Have the manufacturers asked for a higher duty?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - I do not think so. There was some controversy regarding washers, but very little regarding nuts and bolts.

Senator Guthrie - 'They are satisfied with the fortunes they are making.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - I do not know whether they are making fortunes, but we may rest assured that they are doing reasonably well, and if they would pay more attention to standardization their customers would benefit still further.

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